CAPITAL: BAGHDAD
MONETARY UNIT: DINAR
REFINING CAPACITY: 417,500 B/D
OIL PRODUCTION: 2.68 MILLION B/D
OIL RESERVES: 112.5 BILLION BBL
GAS RESERVES: 109.8 TCF

Iraq had a solid position as a long-term, dominant player in the global oil market, but it continued to face the short-term problem of United Nations sanctions.

The US remained the major proponent for the sanctions, but international support was dwindling.

Herman Franssen, director of Petroleum Economics Ltd. (PEL), London, predicted in 2000 that the sanctions would be gradually eased, rather than lifted at once. He explained that the global oil market would remain tight into 2001 and possibly 2002, and if Iraq ceased exports, other members of the Organization of Petroleum Exporting Countries might be unable to offset all the shortfall on short notice.

Iraq discontinued oil exports in December 2000 after a procedural squabble with the UN Security Council over monitoring of its oil-for-aid program, but oil markets paid little attention.

Exports of 2.3 million b/d through the ports of Mina al Bakr on the Persian Gulf and Ceyhan, Turkey, were halted after UN officials rejected Iraq's demand for a 50¢/bbl surcharge payable into an Iraqi bank account. The shutoff continued about a month.

John Fletcher, vice-president of Ranger Oil Ltd., Calgary, estimated more than 60 companies were discussing oil field development contracts with the Iraqi Oil Ministry.

The ministry was willing to negotiate agreements on oil field developments and exploration blocks except for fields reserved for specific operators: Majnoon, Nahr Umr, West Qurma, Ahdab, Amara, and five gas fields in northeastern Iraq.

But Iraq said even the "reserved" contracts would undergo continuing negotiation. Most development-production contracts had changed since they were negotiated in 1992 and 1994.

If the UN sanctions were lifted, Iraqi officials intended to increase oil production capacity to 6 million b/d, with crude exports expected to reach 5-5.4 million b/d, depending on growth rates in local consumption, said an official at Iraq's State Organization for Oil Marketing. That was twice the export level reached in May 2000.

Production capacity would be increased gradually until "major discovered but unutilized fields" were developed about 5-8 years after lifting of the embargo.

The official said export streams would be broadened. In addition to Basrah Light and Kirkuk crudes, a heavy 24-25º-gravity oil and an extra light 38-39º-gravity crude would be exported.

Iraq claimed its gas reserves were more than 3 trillion cu m. A 20-year gas export project to Turkey was studied in 1998. Italy's ENI SPA was selected as the lead company for the line, which would be built if sanctions were lifted.

Other developments

Iraq and Syria planned to build a 1.4-million-b/d export oil pipeline to replace an old one.

Iraqi officials said the 20-year-old pipeline was no longer economical due to leakage and corrosion problems. Its capacity was unclear, but it had been transporting 200,000 b/d.

Syria planned to issue a tender for construction of the section within its borders, while the tender for the Iraqi section would be issued after Iraq's financial situation improved.

The Jordanian government issued a tender for a lateral of the export line extending from the Iraqi border to the 90,400-b/d refinery at Zerka.

Iraq had been exporting 80,000 b/d of oil to the Jordanian refinery using tanker trucks.

Iraq would build another section, from Haditha 260 km northwest of Baghdad to the Syrian border, when the nation had more funds available for infrastructure developments.

Indian company ONGC Videsh Ltd. signed a contract to explore an Iraqi oil field.

The award of the contract for the exploration of Block 8 in Iraq's Western Desert was dependent on work being performed during the UN trade embargo.

Iraqi Oil Minister Amer Mohammed Rasheed said Iraq would not sign contracts with foreign companies unless they carried out work while the sanctions were in effect. The sanctions barred Iraq from investment in its oil sector and free export of its crude oil.

ONGC Videsh, a subsidiary of Oil & Natural Gas Corp., submitted its offer for the block in 1998, but the contract was renegotiated in mid-2000 at Iraq's request. The block was close to Abu Khema oil field, which ONGC discovered in 1974-77.

Rasheed was critical of Russian and Chinese companies for failing to honor contracts to explore Iraqi blocks. He said Lukoil signed a deal in 1996 to develop the second phase of West Qurna field, and China National Petroleum Corp. and China North Industries Corp. had signed a deal to develop Al-Ahdab field in southern Iraq.